Resumen

This paper disaggregates reasons for recent growth in civil service (central government and provincial governments) remuneration in South Africa. This paper draws on an earlier paper published in this journal in 2010 (Padayachee & Rossouw 2010), but has a different emphasis. Padayachee & Rossouw (2010) assessed the relative remuneration levels of two civil service positions in comparison to one another and compared the nominal purchasing power of the remuneration of one of these positions over time, compared to the nominal prices of items purchased by households. This paper reports a first dissemination of the reasons for the overall increase in the civil service remuneration bill over the period of comparison (2005 to 2012); something that has not been done in South Africa before. The selection of civil service positions used for comparative purposes in this paper was determined by the availability of historic and current remuneration information over the period of comparison, as well as the remuneration structures applicable to these positions. The available information made possible a comparison on the basis of cost-to-company remuneration. This is the only suitable approach, given the introduction of amendments to tax legislation and other changes in remuneration practices, rendering salaries of positions as a basis of comparison obsolete. The main objective of this paper is to disaggregate reasons for South Africa's growing public sector remuneration bill over the period 2005 to 2012. To this end this paper tests five hypotheses, namely (i) remuneration is compared with inflation over the period 2005 to 2012 to ascertain the degree in which inflation and real adjustments explain the increase in the remuneration bill; (ii) in comparing remuneration in 2005 and in 2012, possible structural remuneration changes are assessed; (iii) civil service employment figures are analysed as a possible explanation of the increase in the remuneration bill; (iv) higher remuneration levels for existing staff owing to notch adjustments, promotions and new appointments (i.e. employment growth) at more senior levels are analysed as possible contributors to the growth in the remuneration bill over the period of comparison; and (v) the creation of new government departments at national level is considered as a possible factor contributing to the growth in the remuneration bill over the period of comparison. All the hypotheses are confirmed. The analysis shows that the nominal remuneration bill in the civil service increased by 145,6 per cent over the period 2005 to 2012. Adjustments to compensate for inflation, changes in remuneration notches, promotions and appointments at more senior levels, and a structural adjustment in remuneration in favour of more senior staff in the civil service all made contributions to the increase in the remuneration bill. The relative contributions of these aspects can be expressed as: ΔL = f(II. ΔS, ΔW, ΔPV, ε)................................................................................................................(1) with ΔL = change in civil service remuneration; ƒ = a function of (or is determined by); Π = inflation; ΔS = structural changes in civil service remuneration; ΔW = changes in civil service employment at national and provincial level; ΔPV = changes owing to notches, job level increases and promotions (including senior appointments from outside the civil service); and ε = stochastic residual to account for possible unidentified factors that could have influenced the change in remuneration. The contribution of each component in equation (1) is used in equation (2) to assess the increase in remuneration. The relevant values are: ΔW = 145,6 per cent, the increase in remuneration between 2005 and 2012; Π = 53,9 per cent, the rate of inflation between March 2005 and March 2012; ΔS = 26,8 per cent, the structural increase in remuneration between 2005 and 2012; ∆W = 27,3 per cent, the percentage increase in civil service employment between 2005 and ∆PV = 39,1 per cent, the contribution to the increase in civil service remuneration emanating from notches, job level increases and promotions. 145,6 = (53,9 + 26,8 + 27,3 + 36,4 + ε) (2) => 145,6 - 53,9 - 26,8 - 27,3 - 39,1 = ε The analysis shows that the variables identified by the hypotheses explain some 101 per cent (i.e. more than 100 per cent of the total increase) of the change in civil service remuneration over the period 2005 to 2012. This implies that one or more of the variables have been marginally overestimated, as is reflected in the residual (-1,5 per cent). The analysis in this paper shows possible steps that the government can take to limit the growth in civil service remuneration. Inflation should be contained, changes in remuneration notches, job levels and promotions should be limited, and structural adjustments should be avoided. If these aspects are not controlled, a moratorium on new appointments will at best only make a marginal difference to the growing civil service remuneration bill. It is also shown that recent growth trends in civil service remuneration are unsustainable, as similar future growth will not be affordable from an economic perspective. A continuation of the recent growth trend will "crowd-out" other public sector spending priorities.